The Department of Veterans Affairs (VA) continues to prioritize Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) for federal procurement opportunities in 2026. This focus is part of the Veterans First Contracting Program, which mandates that the VA consider veteran-owned firms before other small business categories. Government data shows that SDVOSB contract awards reached $28.6 billion in the previous fiscal year.
Federal agencies are currently operating under stricter certification requirements following the full implementation of the National Defense Authorization Act (NDAA) for Fiscal Year 2024. These regulations have fundamentally changed how veteran-owned firms qualify for set-aside opportunities. Businesses seeking to participate in these programs must navigate a complex regulatory landscape involving the Small Business Administration (SBA) and specific VA procurement rules.
Contracting officers are required to conduct market research to determine if veteran-owned businesses can fulfill specific requirements. This process is governed by statutory mandates and Supreme Court precedents that ensure veterans receive top priority in the VA supply chain. Understanding these rules is essential for any firm looking to secure government contracts or join the GSA schedule.
1. SBA VetCert Certification is Now Mandatory
As of 2026, self-certification for SDVOSBs and Veteran-Owned Small Businesses (VOSBs) is no longer sufficient for federal contracting. All veteran-owned firms must be certified through the SBA VetCert program to compete for set-aside or sole-source contracts. The SBA confirms that this requirement applies to both prime contracts and subcontracting goaling purposes.
The transition of the certification program from the VA to the SBA has now been fully completed. SBA officials said the grace period for self-certification expired in late 2024, making formal certification a prerequisite for award eligibility. Firms that are not listed in the SBA’s veteran certification database cannot be awarded contracts under veteran set-aside authorities.
Maintenance of this certification requires annual updates and periodic re-certification. SBA guidelines state that businesses must notify the agency of any changes in ownership or control that could affect their eligibility. Failure to maintain an active status in the VetCert system can lead to the immediate loss of contract eligibility during the solicitation or award process.
2. The VA "Rule of Two" Remains Absolute
The "Rule of Two" is a mandatory procurement policy that dictates how the VA buys goods and services. Under 38 U.S.C. § 8127, VA contracting officers must set aside a requirement for veteran-owned firms if they expect at least two such businesses to submit offers at a fair and reasonable price. This rule is a cornerstone of veterans affairs news regarding federal spending.
Legal experts said the Rule of Two takes precedence over other procurement vehicles, including existing multi-agency contracts. If market research indicates that two or more qualified SDVOSBs or VOSBs are available, the VA is prohibited from opening the competition to the general public or other small business categories. This ensures that a significant portion of VA spending is reserved specifically for veterans.
Contracting officers must document their market research to justify any decision not to set aside a contract for veterans. This documentation is subject to review and can be the basis for a bid protest if a qualified firm believes the Rule of Two was ignored. The policy has resulted in thousands of contracts being successfully awarded to veteran-owned small businesses across all industries.
3. Impact of the Kingdomware Supreme Court Decision
The 2016 Supreme Court ruling in Kingdomware Technologies, Inc. v. United States continues to define VA procurement in 2026. The Court held that the VA must apply the Rule of Two to all competitive contracts, including orders placed through the Federal Supply Schedule. This decision ended the VA’s previous practice of bypassing veteran set-asides by using the GSA schedule.
The ruling clarified that even task and delivery orders are "contracts" under the law. This means the VA must perform a Rule of Two analysis for every individual order, not just for the initial base contract. Industry analysts said this expanded the pool of opportunities for SDVOSBs by billions of dollars annually.
Current VA procurement regulations, found in the VA Acquisition Regulation (VAAR), have been updated to reflect this mandatory preference. The Kingdomware decision remains the primary legal tool used by veteran firms to ensure they are considered for VA work. It has also influenced how other federal agencies view veteran set-aside authorities, although the mandatory nature remains specific to the VA.
4. Tiered Priority and "Veterans First" Hierarchy
The VA operates under a "tiered" preference system that gives specific groups priority over others. SDVOSBs occupy the highest tier in this hierarchy. If a requirement cannot be met by two or more SDVOSBs, the contracting officer must then look to VOSBs (non-disabled veteran-owned firms) before considering other small businesses.
VA officials said this hierarchy ensures that service-disabled veterans receive the first opportunity to compete for agency funds. Only after the pool of veteran firms is exhausted can the VA utilize 8(a), HUBZone, or Woman-Owned Small Business set-asides. This structure makes the VA unique among federal agencies, most of which treat various small business categories with equal preference.
This hierarchy is strictly enforced through internal agency audits and federal oversight. Businesses categorized as VOSBs should be aware that they may lose opportunities to SDVOSBs even if they are otherwise qualified. For companies seeking more information on these tiers, the USGov.News articles section provides regular updates on procurement policy changes.
5. Increased Sole-Source Thresholds for SDVOSBs
The VA has the authority to award sole-source contracts to SDVOSBs and VOSBs under certain conditions. In 2026, the threshold for these awards is $5 million for both services and manufacturing requirements. This is higher than the standard sole-source thresholds for many other small business programs, providing a significant advantage to veteran firms.
Contracting officers can use this authority when they determine that only one veteran-owned firm is capable of performing the work at a fair price. SBA regulations state that these awards do not require a separate Justification and Approval (J&A) beyond the basic eligibility verification. This streamlined process allows the VA to quickly meet urgent needs while supporting veteran entrepreneurs.
Sole-source awards are often used for specialized medical equipment, facility repairs, and professional services. Veteran-owned firms are encouraged to market their capabilities directly to VA program managers to become candidates for these direct awards. The ability to secure a $5 million contract without full competition is a primary benefit of the SBA VetCert program.
6. Limitations on Subcontracting (Performance of Work)
SDVOSBs winning set-aside contracts must adhere to strict "limitations on subcontracting" rules. For service contracts, the veteran-owned firm must perform at least 50% of the cost of the contract with its own employees or other "similarly situated" veteran-owned firms. This prevents larger companies from using veteran firms as "fronts" to secure set-aside dollars.
The SBA said that compliance with these percentages is monitored through contract reporting and site visits. If a firm fails to meet the 50% threshold, it may face penalties, including contract termination or suspension from federal contracting. This rule ensures that the economic benefits of the set-aside remain with the veteran community.
Similarly situated entities: other certified SDVOSBs: can be used to help meet the 50% requirement. This allows smaller veteran firms to team up on larger projects that they might not be able to handle alone. For more details on compliance, businesses should review the latest press releases regarding SBA enforcement actions.
7. GSA Schedule and Federal Supply Schedule Integration
While the VA has its own Federal Supply Schedule (FSS) for medical supplies and services, many veteran firms also utilize the general GSA schedule. In 2026, the integration between these schedules and the SBA VetCert database is seamless. When the VA places an order through a schedule, it must still verify the vendor's veteran status in the SBA system.
GSA officials said that agencies outside the VA are also increasingly using SDVOSB set-asides on their schedule buys to meet their 5% prime contracting goals. Having a GSA schedule contract can make it easier for a veteran firm to be "found" by contracting officers during market research. This is particularly true for IT services and office supplies.
However, a GSA schedule contract does not exempt a firm from the SBA certification requirement. Even if a company is already on a GSA schedule, it must complete the VetCert process to be eligible for veteran-specific orders. The combination of a GSA schedule and SDVOSB certification is considered one of the most effective ways to secure recurring federal revenue.
8. Continuous Eligibility Requirement
For VA contracts, an SDVOSB must be eligible and certified both at the time of its initial offer and at the time of the contract award. This is a stricter standard than many other federal programs. If a firm’s certification expires or its ownership changes during the proposal evaluation period, the VA cannot legally award them the contract.
Legal counsel for veteran firms said this "continuous eligibility" rule is a frequent subject of bid protests. If a competitor discovers that a winning firm’s certification lapsed for even a few days during the evaluation, the award can be overturned. Businesses must proactively manage their SBA VetCert profiles to ensure there are no gaps in their status.
The SBA VetCert portal now provides automated reminders 90 days before a certification expires. It is recommended that firms begin the renewal process as soon as they receive these notices. Maintaining eligibility is as important as the quality of the proposal itself when pursuing VA opportunities.
9. The "Contract Our Veterans Act of 2026" Proposal
Legislators are currently considering the "Contract Our Veterans Act of 2026," which seeks to expand veteran contracting authorities. If passed, the bill would create a government-wide 5% prime contracting goal for non-disabled VOSBs, similar to the existing goal for SDVOSBs. This would expand the "Veterans First" concept beyond the VA to all federal agencies.
Proponents of the bill said it would provide more opportunities for the millions of veterans who do not have a service-connected disability. The bill would also mandate that all agencies use the SBA VetCert database, further centralizing the certification process. This legislation reflects a growing bipartisan effort to support the veteran business community.
The proposed law would also allow all agencies to use the Rule of Two, potentially mirroring the VA’s success in hitting its procurement targets. While the bill is still in the committee phase, it signals a long-term trend toward more veteran-centric procurement policies. Stakeholders can track the progress of this bill through USGov.News.
10. Utilizing Technical Assistance via APEX Accelerators
Navigating SDVOSB set-asides can be challenging, but free resources are available to assist veteran entrepreneurs. APEX Accelerators (formerly known as PTACs) provide specialized training and counseling on government contracting. These centers are funded in part by the Department of Defense to help small businesses enter the federal marketplace.
Counselors at APEX Accelerators said they help firms with everything from SAM.gov registration to preparing for an SBA VetCert audit. They can also assist with finding specific solicitations that are set aside for SDVOSBs. Utilizing these resources can significantly reduce the learning curve for new contractors.
In addition to APEX Accelerators, the SBA’s Office of Veterans Business Development (OVBD) offers Veterans Business Outreach Centers (VBOCs). These centers focus on the broader aspects of running a business, including access to capital and business planning. For veterans in 2026, these support networks are essential for successfully winning and performing on federal contracts.
